What mortgage for property rennovation?

Posted on 15 February 2010 by joel Bailey

I have found a Georgian property that I can get for £500,000, it needs work to get it to a position we could live in it (new baby on the way). I think we could get a standard mortgage on it. I feel that its worth possibly £100000+ more than would be paying for it. Would we be able to release any equity after the buy, I'm sure it would be valued more than we are paying for it. We cannot get any renovation mortgages as we would need 30% for purchase, exhausted that route. We will have £30000 to start the works after purchase. But need more to get it right to live in.


Whether or not you will get a standard mortgage on this property will depend very much on what works are required and the valuer's assessment of the property's current and future value.  Lenders are looking for properties to be habitable before they will release any mortgage funds and this means that there must be the basic amenities of hot & cold running water, a kitchen, a bathroom, an inside toilet, electricity and adequate heating.

Given that you only have a 10% deposit and the very small number of lenders looking at 90% mortgages,  I think the most likely outcome is that the lender will withhold all the mortgage funds until the work has been completed.  This leaves you in the position of not only having to fund the renovations, but also the original purchase unless you can gain access to the property between exchange and completion to complete the works.

If however, the property is deemed habitable by the Lender's valuer and you are able to complete the purchase by normal means, it should then be possible to raise additional funds by way of a further advance based on the improved value of the property.  This can be arranged at the same time as the original mortgage application and you should be able to secure funds on the same product.  To do this you would need to be able to supply the valuer with full details and plans of the improvements you intend to make when he first visits the property.  Be aware that you will not necessarily see a direct increase in the value in relation to the amount you spend on renovation.  It will probably be necessary for the valuer to make a further visit or visits before any additional funds are released and there will be a charge for this.

I suggest that you speak to a local independent financial adviser who will be able to look at your plans and select the right lender and product for you.


Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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